tv Nightly Business Report PBS November 7, 2012 6:30pm-7:00pm PST
>> this is n.b.r. >> susie: good evening everyone. i'm susie gharib. a day after the election a massive selloff on wall street as investors worry about the status quo in washington. >> tom: i'm tom hudson. the election is over but the fiscal cliff, is just eight weeks away, and it will play into every decision the president makes until january first. >> susie: and the fiscal cliff is a big worry for business leaders. the c.e.o. of caesars entertainment, tells us it'll be "very damaging" for his company. >> tom: that and more tonight on "n.b.r."! wall street greeted the election results with a big sell-off in stocks.
investors dumped shares of almost every type, giving the s&p 500 it's worst day since june. beyond the u.s. elections, europe also brought fresh worries for investors with concerns in greece, and germany. here's how the numbers stacked up on wall street. the dow lost 312 points, at it's worst point of the day, the blue chip index was down 369 points. the nasdaq tumbled nearly 75 points and the s&p 500 off 33. suzanne pratt takes a look at where the market goes from here. >> reporter: let's be candid. this is not the election outcome that wall street wanted to see. after all many investors believe president obama's tax policies will hurt corporate profits. on top of that there's the likelihood of more regulation in the president's second term. those concerns were evident in selling today of energy, banking and healthcare stocks. a quick look at the price board at the new york stock exchange is a good barometer for the
worrywarts out there. wall street veteran teddy weissberg says many investors are just plain upset. >> there was an expectation that we would have some change and a change in the policies. and, i think with obama getting re-elected there are a lot of folks that are not happy, and we're kind of seeing that in the stock market. >> reporter: but, others say it's not just the disappointment of romney's loss, it's that the fiscal cliff now looms large on wall street. >> i think the big issue right now is the fiscal cliff, now that the election is behind us everyone is really focusing on what's going to happen at the end of this year, and of course if nothing's done by the end of the year that may very well mean a recession as early as next year. >> reporter: still, the best news for equity investors is that the election was decisive. the next few days or weeks will not be dominated by challenges or hanging chads. instead there is the hope the still divided congress will work
together with a reinvigorated president to solve america's fiscal problems. and some predict that spirit of cooperation will help lift stocks higher again. >> what i encourage investors to realize however is that an agreement at some point in time is more likely than not and as a result of that you're probably going to see a relief on the other end, the last thing you want to do right now is time the market. >> reporter: here's one hopeful tidbit that might have been lost in all the recent political rhetoric. the stock market is far better off today than it was four years ago. in fact the dow gaining about 60% since president obama's took office in january 2009. suzanne pratt, "n.b.r.," new york. >> susie: in washington today, a lot of talk about the need to get an agreement on the fiscal cliff, and to reach a bi- partisan solution. but as darren gersh reports, both sides are still trying to figure out the message of the election, and may be reluctant to compromise for now.
>> reporter: the voters have spoken and house speaker john boehner says he has gotten the message. >> because the american people expect us to find common ground, we're willing to accept some additional revenues via tax reform. there's a model for tax reform that supports economic growth. >> reporter: does that mean house republicans are now willing to accept higher taxes on those making more than $250,000? not exactly. boehner says he will only raise more money from taxes under what he called the right conditions. >> does the increased revenue come from government taking a larger share of what the american people earn through higher tax rates? or does it come as a bi-product of growing our economy, energized by a simpler cleaner fairer tax code with fewer loopholes and lower rates for all. >> reporter: democratic senate leader harry reid also says he wants a quick fix for the fiscal cliff. but, he was clearly feeling empowered by a strong showing in
the election. >> i want to work together, but i want everyone to understand you can't push us around. >> reporter: and raising taxes on the well-off is clearly a top priority. >> all the exit polling, all the polling we've done, the vast majority of the american people support that, including rich people. >> reporter: many republicans see the election as more of a return to the status quo and that will make negotiations on the fiscal cliff tricky. >> the discussion around taxes will have to be calibrated in a way that recognizes that there are certain red lines for both parties that probably will not be crossed. >> reporter: now that the election is over, policy makers are likely to feel more pressure to reach an agreement to ease the fiscal cliff. the public clearly does not like the automatic spending cuts that are set to take place on january first. and polls show many voters don't care for the hard line house republicans took to any agreement that raises any taxes to tame the budget. >> they endanger themselves even further, i think, if they
continue to be seen as obstructionist. the vast majority of people said, we want people to try to come together and solve our economic problems. so think there is a real danger. the status quo is a danger for them. >> reporter: the status quo is surely a danger to financial markets. if budget talks fail next year moody's says it will downgrade the country's credit rating. darren gersh, "n.b.r.," washington. >> tom: stuart sweet is president of capitol analysts network. he joins us from our washington d.c. bureau. what do you make of today's stock sell-off? election related? >> so, stew, is what we saw today in the stock market, with the selloff, the reaction to status quo. >> no. i think that is an overstatement. i think it is more of a reaction to what happened in europe, where the e.u. central banker said that germany was not looking so hot. >> so instead of reacting to the election, it was europe in your analysis. let's talk about the economy here, though, with the fiscal clip. you heard john boehner willing to accept new
revenue. heaharry reid in the senate, saying you can't push us around anymore. is this language that begins compromise. >> it will begin compromise, but it may be far more horrowing. it may be it takes place next year, rather than this year. the problem is john boehner himself has one more election. he wants to be re-elected as speaker of the house. that does not take place until january 3, 2013. if he cuts a deal with barack obama, he faces a serious revolt in his own caucus. >> tom: is your caution then don't expect a fiscal clip solution before january 3rd? is that what investors to expect? >> the best way out of this impasse for the time being, is gracious gesture for the president-elect, re-elect, president obama, he should offer to extend the tax cuts perhaps until
march of next year. giving john boehner an opportunity to win his own re-election, and gather some goodwill on the republican side of the aisle. if mr. obama doesn't see it that way, we're in for a rough ride until next january. >> tom: next january is right around the corner for even short-term investors. you're talking about just eight weeks away. >> that's true, but let's not forget what happened with tarp one and tarp two. if we spend eight weeks, through the entire holiday seasons, wrangling about going over the cliff, and moody's keeps on threatening, and we're going to have a recession, and if that's the kind of talk we hear, angry talk in the holiday season, i don't think the markets are going to enjoy that and there will be a selloff. >> tom: stew, let's talk about the markets because a couple of places you identified to watch that could benefit under the second term for president obama, medicaid, managed
care, each up about 4%. is the market pricing in booming business with medicaid? >> there is an up side -- i think there probably is. we settled that obamacare will become the law of the land. that means something like 12 million additional costumers for medicaid insurers. you named two companies had had large exposures if that comes through. the only possible side is if they trimmed back medicaid spending as part of this big package that john boehner was talking about. over all, it is a sunny situation. >> tom: speaking of sunny, thanks for the setup, solar fell by 4%. carbon, cleaning up the emissions from coal-fired power plants. >> well, all alternative
energy relies on tax credits, president obama wants to extend these. it is clear from john boehner's comments, he is open to reforming the tax code. we will have a discussion on taxes one way or the other. if president obama wants to extend the alternative energy tax credits, he will probably be able to do so without customarily haggling with boehner. if that happened in president obama's first term was a green light given to e.p.a. to become as aggressive as they want to on ozone control. second term, e.p.a. could be quite aggressive. and there are certain companies that would benefit by ozone control. >> tom: calgon being one of them. do you own any of the four? >> i do own some with calgon. >> susie: still ahead, "surgery in aisle 5," wal-mart teams with the cleveland clinic on an innovative program giving the retailer's employees world class surgical care.
a crucial vote in greece today, triggered violent protests, and clashes with riot police in athens. nearly 100,000 people took to the streets, hurling rocks and gasoline bombs outside the greek parliament, where lawmakers prepared to vote on new austerity measures. the demonstrations were the biggest in over a year, against the spending cuts greece must approve to avoid defaulting on its i.o.u.'s. the parliament gained enough votes to pass the unpopular measure, meaning $17 billion of cutbacks and tax hikes are now law. >> susie: meanwhile, a setback today for europe's strongest economy: germany. economists at the european commission cut their growth outlook for germany next year to 0.7%, a full percent lower than its previous estimate. there are new worries that german manufacturers are impacted by deep recessions in other euro-zone countries.
>> susie: businesses have been on pause for a long time? but now that they know president obama has won a second term? what decisions will business leaders make? that's what i asked gary loveman today. he's the c.e.o. of caesars entertainment; he runs the largest gaming company in the world. >> i don't think we will do anything differently as a result of the election at this point. i think once we see whether there will be a tax for fiscal sanity, that will help. we have this so-called fiscal cliff emergency that is before us. if that fails to be
resolved, you'll see a level of contraction in all hands on deck activities. it will be very disturbing. >> suzanne: if there is no deal on this fiscal cliff, what does that mean for your business? >> i think it will be very, very damaging to a consumer discretionary business, and others similar to it. because you'll see an immediate reduction in economic activity, of the sort we have not run into since the arab oil embargo, where all of a sudden, on a precise moment, economic activity will slow very substantially. you can see a period where it begins to slow even in anticipation of that. i think for a business like ours, that people don't have to do, they're doing it out of discretionary monies, it will be very damaging. >> suzanne: congress is saying if there is no fiscal cliff, it could push the economy into a recession. how are you preparing for that? would that mean layoffs at caesar's? >> it will mean reduction in hours for our
employees. we reduced in 2008, so it is unlikely we would layoff more people than we have already. but you can see less services offered in the facilities at certain times and somewhat reduced employment levels. >> suzanne: you have plans to open casinos in baltimore -- has any of that changed? >> no. these are long-lived investments, in cases like boston, cincinnati, or cleveland, they were never allowed and all of a sudden they will now be. we go into those markets irrespective of what we see in the markets today. if there were to be a fiscal cliff event, we may slow the pace of activity in las vegas. >> do you still think the u.s. is one of the best places to invest? >> i still do think it is. but if you asked me that a couple of years ago, the rest of the world had
growth, but, fortunately, the u.s. has come back. with the right medicine in this country to cure the economic circumstances, the united states economy could become one of the most dynamic investment areas. >> suzanne: the other issue that came up in the election is taxes. if they go up, what does that mean for your costumers in your business? >> an increase in taxes in the new administration is a bad idea for the american economy in every respect, and certainly for my costumers. the country is very weak. the economy is very weak. the consumers' household budgets are very weak. this is not a time for an increase. >> suzanne: how would you describe your confidence level right now? >> my confidence level is somewhat better than it had been recently. i have to believe that the leadership of the country, with the elections now resolved, will come together and address the critical issues that face the country. these are solvable problems, and pragmatic problems. there is a solution. if they can do that, we will be in a much better
place. >> suzanne: as you know, the relationship between president obama and the business community has been strained over the past couple of years. do you see that changing? >> i think it could very well change. it is entirely up to the tone the president wants to set. this community will re-warm to the president in a pragmatic way. he is our president, he will be our president the next four years. we will do everything possible to make it a successful term for him, but we need a joint effort. >> suzanne: gary, thank you so much for your time. >> thank you. >> tom: americans are borrowing again. consumer credit rose for a second straight month thanks to a pickup in borrowing for cars and college. the federal reserve says consumer borrowing rose by nearly $11.5 billion in september. that's on the heels of a revised jump in august borrowing. economists say americans are feeling more confident and borrowing more as they see the housing market stabilize and rebound in some areas.
>> tom: as new york and new jersey struggle to recover from super storm sandy, a nor'easter is pummeling the region tonight, bringing with it powerful rains, wind and sleet. already today, 22,000 homes and businesses have lost power between the carolinas and new york. that's on top of the 650,000 people still without power from sandy last week. today's storm has also forced the cancellation of nearly 1,500 flights in the northeast, with newark airport in new jersey facing the most cancellations. >> susie: boeing showed today how it's preparing for the so- called "fiscal cliff": it's restructuring its defense business, big time.
as the pentagon's largest supplier, boeing said it is slashing management jobs by 30%, consolidating business units and closing some defense facilities in california. boeing hopes to cut costs by more than $1.5 billion over the next two years. >> susie: boeing shares got caught up in the market downdraft, tom, falling 2%, and it had plenty of company. all 30 of the dow components were in the red today. >> there was a lot of red on the screen this post-election day. in europe, and also earnings, all getting mixed in here. let's get under way with tonight's market focus. >> tom: stocks dropped right from the opening bell today as investor focus shifted beyond election day. the s&p 500 opened down, and fell to its lowest price of the session just before noon eastern time. the pressure was steady throughout the afternoon hours, with the index finishing lower by 2.4%. today's drop in s&p 500 is its sharpest sell-off in four and a
half months. it takes the index down to a level last seen in august. trading volume was heavier. 875 million shares on the big board. just over two billion traded on the nasdaq. leading the sell-off, the financial sector falling 3.5%, the energy sector dropped 3.1%, and technology was under pressure again, down 2.8%. big banking stocks, bank of america and j.p. morgan, were the top losers among dow jones industrial stocks. bank of america saw heavy selling, down 7.1%. volume was very heavy with more than 285 million shares. j.p. morgan dropped 5.6% on more than double its usual volume. within the broader financial sector, investment bank morgan stanley led the losers, falling 8.6%. this is a six week low. analysts point to the threat of financial regulation, europe and the fiscal cliff for areas of concern for the financial industry. in energy, it was coal stocks driving the selling. coal shares had staged a small rally in recent weeks, showing some optimism regarding mitt romney's presidential campaign. but with president obama's re- election, coal companies sold off. arch coal was down 12.5%.
alpha natural resources dropped 12.2%. peabody energy shed 9.6%. the industry may see more clean air regulations in president obama's second term, hurting demand. healthcare was also in focus today after the election. and among the winners: hospital stocks. with health care reform moving forward, hospitals could benefit from an increase in insured patients. h.c.a. popped 9.4%. health management associates gained 7.3%. community health rose 6%. beyond the election reaction, apple continued losing ground. a key asian supplier of the iphone 5 said production of the device was difficult due to quality standards. the supplier said it is shipping far fewer iphones than apple wants. it has been a fast fall for apple stock. six weeks ago it was above $700 at a record high. after dropping 3.8% today, the stock closed at $558. it's now in a bear market, down more than 20% from its september high. a key apple partner, a.t.&t. shed 3.3%. the company announced it will spend more money, about $22
billion a year for the next three years, upgrading its wireless and landline networks. a.t.&t. hopes the investments will lead to higher revenue growth. it also raised its quarterly dividend, but that didn't help stem today's stock loss. another key apple partner, semiconductor maker qualcomm was in focus after the closing bell. fiscal fourth quarter earnings were stronger than expected thanks to more demand for smart- phones including its technology. its outlook was stronger than expected too. after closing down 3.7% to $58.12 per share during the regular session, they rebounded to $63 in extended hours trading. as investor attention turn toward the fiscal cliff combination of tax hikes and government spending cuts, they were looking for safety in government i.o.u.'s. the interest rate on the 10 year benchmark government bond dropped to 1.63%, it's lowest since early october. as this yield falls, the price of the bond rises. all five most actively traded exchange traded products
suffered losses. the financial sector fund fared the worst, down 3.3%. and that's tonight's "market focus." >> susie: walmart could change health care the way it changed retailing. the world's largest retailer has deals with six of the nation's leading medical clinics. walmart employees and their families can get free consultations and surgeries without paying any out-of-pocket expenses. diane eastabrook recently talked to the president and c.e.o. of the cleveland clinic about the
walmart effect. >> reporter: with nearly a million and a half u.s. employees-- walmart has the muscle to wring out health care costs from providers. and that's why it's made deals with six large providers including the mayo and cleveland clinics to do free spine and heart procedures for employees and their families. the idea isn't a new one. lowes has had a similar deal with the cleveland clinic for a while and other companies like boeing want to do the same thing. but walmart's influence could prompt even more companies to follow suit. cleveland clinic president and c.e.o. dr. delos cosgrove talked to me about the significance of the walmart plan to his facility. >> we can't tell you how many patients are going to be coming here because they've also signed with mayo clinic, geisingers, and virginia mason so it will be disbursed across the country, but we are delighted to have them and we have the capacity to look after them. >> reporter: so if i'm a walmart employee what would i come to the cleveland clinic for?
what kind of procedures? >> well mainly for heart surgery is what they'll be coming here for and the nice part of it and one of the reasons they like it is that all of our physicians are employed, so there is no incentive for them to do more or for them to do less. frequently people are sent here for a heart operation and they see gee we could treat you better this way and you won't need it which is there is no need to do a heart operation from a financial standpoint. >> reporter: is insurance involved in any way? no these are companies that are self-insured so that has worked for them. i think it's a practical approach for companies that are self-insured and i think it also begins to teach both companies and the cleveland clinic how to do bundling around services, in taking everything that goes into a service and putting a fixed price on it and delivering it that way. and it helps the company know what their costs are going to be and it helps us look very specifically at how to reduce costs. so why is this a good thing for companies to do? is it because
medical care is so inconsistent around the country? >> well one of the things that we see is a tremendous variance in cost and quite a big variance in quality across the country for high end procedures and that is a concern to the company both because of the quality they may wind up with a second operation or not a good result from their first procedure or intervention. so, they want to get their employees back to work, and they want to do it high quality so they don't have to come back a second time or something or other and they want to have it at a price they can know and predict. so, it seems to work well. >> reporter: dr. cosgrove, thanks so much for joining us. >> well thank you very much. >> it was a record-breaker for twitter as well. it marked the most tweets ever for a political event. there were more than 31 million election related tweets on tuesday
night. at its highest point, we were seeing 327,000 tweets per minute, just after president obama's was called as the winner. and with almost 750,000 re- tweets, a photo posted on barack obama's twitter feed has become the most retweeted post in history. >> susie: that's nightly business report for wednesday, november 7. good night tom and everyone. >> tom: goodnight susie, we'll see you online at: www.nbr.com and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org